5 Ways to Recession-Proof Your Dealership.

Are you in-charge of running a new car dealership and starting to see the signs of slowing car sales? You are not alone. The national news agencies, the Federal Reserve, and industry analysts all agree. The slow down is coming and with it brings immutable changes to the auto industry.

Here is what Forbes is saying referrencing a Bloomberg report regarding the coming economic recession in the US:

"United States Recession Probability Forecast, which shows the median probability (of a US recession) in the 35% range as of this writing..." https://www.forbes.com/sites/advisor-intelligence/2019/09/24/recess...

Here is another revealing article from Bloomberg directly, predicting the coming collapse of US auto sales figures:https://www.bloomberg.com/news/articles/2019-10-01/toyota-typifies-...

Here is the main takeaway: New car sales are declining and that is not occuring in isolation. Truth of the matter is; the US consumers' current buying patterns are weakening and we're due for a recession in the US soon. When it actually occurs, is anyone's guess, however it is near.

That being said, the-show-must-go-on. You're a smart dealer and you want to plan ahead for all contingencies. You want to win today but not at the expense of tommorrow. What's the best strategy to recession proof your dealership? On that later.

First: What are recessions?

Besides the technical definition of a decline in GDP in two successive quarters, recessions are economic baptisms: Old businesses die, new businesses are born. Old demands vanish and new demands appear. Old industry wither away, new industries take shape. Old companies become irrelevant and new companies are created. Here is short list of companies started during a recession:

  1. General Electric:1890
  2. IBM: 1896
  3. General Motors: 1908
  4. Disney:1923
  5. Burger King: 1953
  6. Microsoft:1975
  7. Apple: 2001

Do you recognize any of them?Of course it is a rhetorical question!

The reality is; consumers just do not wake up one day and decide not to spend their money anymore. They simply reallocate their dollars to alternative products and services. It's all mental, in a sense economies are not static realities, they are physical manifestations of our collective conscious and unconscious believe systems.

So, we agree that recessions bring about a marked change in buying habits of consumers and the auto industry is certainly not immune to that change. This is precisely why as a general manager or a dealer principal, you must find ways to keep your dealership relevant and your customers engaged.

This means for example; when other dealerships are reducing marketing budgets and going conservative, a winning strategy might be to increase marketing budgets along with raising your customer service levels. This is the time to buck-the-trends and double-down on your efforts.

Here are five areas of focus to recession-proof your dealership:

  1. The mindset change: First and foremost: You must as an organization adopt a recession-proof mindset and that mindset is your ability to change and the speed with which your team implements that change. Every single team member of your dealership must and will need to run plays from the same playbook. You're a leader and a leader is a "dealer of hope". Make decisions a quick enterprise. Do not allow the old mindset to force your organizition to recede back into the old ways. The most dangerous phrase in business: "We've always done it this way" will always be the easiest thing to revert back to. Do not let it slow down your ability to respond to new customer demands or create mental roadblocks in introducing new intitiatives. The best place to start is to gather as much customer feedback as possible. Ask your customers what do they want from you - simple. Obssesively read your CSI survey results and online reviews. What do they reveal about your organization and better yet the mindset of your customer base?
  2. Double down on your ad spend. Market more aggresively not less, but make marketing an investment not an expense. Hold third-party vendors to the fire if they make a claim. "Retail is detail" and if you have never been a detail oriented person, its time to change and evolve.
  3. Solve a problem that gets worse with recession: When customer are not buying cars they are servicing them more. Is your Service department ready for the increased traffic on the drive? More calls, more appointments, and more repair orders. However, same capacity, will result in less attentive staff, delays in work completion times, unhappy customers, bad surveys and reviews will eventually lead to a decline of profits. Be obsessed with how your customers experience your brand. Invest in drastically improving the quality of every customer touchpoint. In every crisis there is an opportunity. Tactically, it is time to streamline your organzation's decision making process. Learn to run lean so you can run fast.
  4. Competition proof your dealership: Do one thing your competition is scared off their socks to do. Perhaps it is time to take your Service concierge program to the next level and implement a technology solution which facilitates an efficient customer vehicle and drop off operation. How will this affect your market penetration inside your own Primary Marketing Area (PMA)? There are a few third-party vendors out there with solutions which are being utlilized by a healthy dealer base. Always ask for references before signing up with any vendor and make sure the added expenses do not negatively affect your balance sheet. A positive return-on-investment is a must.
  5. Unlock the hidden profits in your DMS data: Equity-buy-back programs only work when you fully work them. There is no better place to start with those then your Service drive. Where else are you going to get so many daily cutomer touchpoints? The customer is there and so is their trade. It is a captive audience. However there is a particular way you must execute the Service equity program to get the daily wins. Here is the best and the most proven way to do it: Split up the efforts in three separate areas. 1) The Technology - look for solutions which track real-time open repair orders and provide you beyond just the equity on the vehicle in Service. You will need more detailed open loan information such as monthly payments, current interest rate, term of the loan and principal to personalize each transaction to customers' needs. 2) The Strategy - Setup real-time alerts for open repair orders and have your Sales BDC call customers who are still at your dealership and enroll in a vehicle-buy-back program. Once you get a verbal "yes" from your customers on-site, then it becomes substantially easier for your sales associate to approach them. 3) The Approach -The best way to close Service equity leads, is to not treat them as traditional sales transactions, because they are NOT. Customer did not show up at your dealership through the front door, rather through the Service drive. Provide them options and craft offers "they can't refuse". Be decisive and do not be greedy. If they have a strong FICO score, positive equity in their trade, and are willing to talk, there is a strong probability, that it is a deal.

A complete automotive sales collapse may be a thing of fantasy. However some stores are barely hanging on to a profit thread and surviving only through OEM incentive programs. Do the internal financial math and come up with a figure in terms of percentage decline in over-all sales which might put your organization in a severe financial bind. Then go as a team and craft new products and services to deliver to your customers, so you can mitigate for those revenue losses. Be PROACTIVE. BE INNOVATIVE.

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